The Cost of Private Debt Over the Credit Cycle
AbstractWe identify global and regional fluctuations in international private debt flows to emerging and developing countries using data on cross border loans and international bond issuance over 1993 -2009. We estimate the effects of individual borrower characteristics as well as macroeconomic conditions on the cost of foreign borrowing and test whether these effects differ across phases of the lending cycle. We find that public and financial institutions benefit from lower spreads compared to private and nonfinancial firms and that lenders may differentiate the risk associated with the borrower’s industrial sector between good and bad times. The loan (bond) rating has an equally robust spread reduction effect across credit cycle phases. The results also suggest that international reserve holdings and investment ratios have a significant effect on reducing credit spreads for loans, while higher reserve holdings and longer maturities matter more for bond spreads.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/283.
Date of creation: 01 Dec 2010
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-03 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nadeem Ul Haque & Manmohan S. Kumar & Nelson Mark & Donald J. Mathieson, 1996.
"The Economic Content of Indicators of Developing Country Creditworthiness,"
IMF Staff Papers,
Palgrave Macmillan, vol. 43(4), pages 688-724, December.
- International Monetary Fund, 1996. "The Economic Content of Indicators of Developing Country Creditworthiness," IMF Working Papers 96/9, International Monetary Fund.
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